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How The U.S. Oil Boom Could Quickly Become A Bust

Today’s Energy Update
(Because Energy Fuels Our Lives)

I have written about this topic before, but it deserves a review at this crucial point in time where the oil markets are concerned. Just half a year after they agreed to implement significant new cutbacks in their crude oil exports, ministers from the so-called OPEC+ countries (OPEC plus non-OPEC nations like Russia, Mexico and Kazakhstan) will likely be asked to cut back even more when – or if – they meet next in July.

I say “if” because, as of this writing, the OPEC+ nations can’t even agree to a specific date on which to hold their proposed July meeting in Vienna . Saudi Energy Minister Khalid al-Falih said over the weekend that he is “hoping” that the OPEC nations will meet at some point during “the first week in July,” but could not say whether or not the non-OPEC nations would agree to join the meeting.

Minister al-Falih’s remarks only serve to add more uncertainty to a market that has already been plagued by that dynamic in recent weeks, as crude prices have dropped by about 17% over the past month. A series of unanticipated crude inventory builds have led to speculation that the market is currently over-supplied. That speculation was exacerbated late last week, as the International Energy Agency (IEA) cut is crude demand growth forecast for the second half of 2019 by 100,000 barrels of oil per day (bopd).

The IEA forecast cut comes amid speculation that the ongoing tariff battle between the U.S. and China has resulted in a slowing of Chinese economic growth. Combine that with the ongoing collapse of production from Venezuela, disruptions of supply from OPEC members like Nigeria and Libya, and the series of attacks on crude tankers in the Persian Gulf and Gulf of Oman, and you have the most unstable market situation we’ve experienced in recent years.

Read the Rest Here

 

 

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Rising Gasoline Prices: 3 More Things To Know

Today’s Energy Update
(Because Energy Fuels Our Lives)

 

After the price for gasoline at the pump had risen over much of the first month of this year, I published a piece in late January detailing seven key factors that go into determining what those prices will be in the United States. Given that gas prices have gone up again in the past two weeks after the first half of February was relatively stable, now is a good time to discuss the reasons why that has taken place.

There are three main reasons for this recent uptick of 13-15 cents per gallon across the country, as follows:

The deteriorating situation in Venezuela – That late January piece in part had this to say about the possible impact on U.S. gas prices due to the looming collapse of the Maduro regime: “Venezuela has been a fairly significant exporter to the U.S. but its volumes have steadily fallen in recent years as its economy has collapsed. U.S. refiners will have to find another source of crude to replace the lost Venezuelan volumes, and to the extent they must pay higher prices to obtain that feedstock, the higher costs will be passed through to the consumer.” This appears to have impacted gas prices to some extent, although no one really seems to have a good handle on how much of the recent price climb is attributable to Venezuela.

Routine refinery maintenance season has begun. – Late February is typically the time of year when many refiners begin taking their facilities temporarily offline for routine maintenance purposes. Refineries are very complex facilities with a high number of moving parts that operate under high temperatures and pressures, in good weather and bad. All of these factors and more require require that the facilities be shut down for a few weeks once or twice each year for routine maintenance.

 

Read the Rest Here

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Is an Oil Price Train Wreck Hiding Around the Bend?

Today’s Energy Update
(Because Energy Fuels Our Lives)

The energy media has recently featured headlines that seem at odds with one another and that, when taken together, portend the possibility of a coming train wreck somewhere down the road where crude oil supply and prices are concerned. Let’s look at some of the more recent headlines as examples:

“The U.S. Shale Boom is About to Get a Major Upgrade” – Investors Business Daily, Feb. 19

“Wall Street Calls for Better Returns; Shale Gets Thrifty” – Gulf Times, Feb. 17

“OPEC Cuts Send Crude Exports to Lowest Since 2015” – Financial Times, Feb. 19

“U.S. shale oil output to hit record 8.4 million bpd in March: EIA” – Reuters, Feb. 19

That Investor’s Business Daily story begins by stating “The U.S. shale oil boom is about to get a whole lot bigger. The reason: Giant oil companies like Exxon Mobil (XOM) are leveraging their massive scale to unleash more production from the top-producing shale oil formation.”

The EIA projects that the domestic industry will push U.S. oil production past the 12 million barrels of oil per day (bopd) level for the first time in the nation’s history in March, with 70% of that coming from shale plays. Fully 1/3rd of all oil produced in the U.S. in March will come from the Permian Basin alone.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

Talking Gas Prices, Venezuela and OPEC

Yesterday I appeared on BYU Radio’s “Top of Mind” program with host Julie Rose. We had a wide-ranging 20 minute discussion about gasoline prices, America’s shale revolution, the Trump sanctions on Venezuela and the ongoing influence of OPEC over crude oil prices.

Here’s the Link

Enjoy!

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Reports Of OPEC’s Demise Have Been Greatly Exaggerated

And just like that, everybody stopped talking about the possibility of $30 oil.

Remember those gaudy days, all of two weeks ago, when the price for WTI had dropped to $42 per barrel and fears were rising that the OPEC+ countries had somehow lost all control over the market and prices would continue to fall? Yeah, those were some good times, huh?

Today, January 15, the WTI price has recovered to over $51/bbl, a rise of 25% in two weeks. That did not happen because of suddenly higher global demand, because no such thing has taken place; nor did it happen due to a dramatically lower U.S. rig count, since the DrillingInfo domestic rig counthas dropped by just 15 rigs since January 1; and it didn’t happen due to the much-publicized recent curtailments in Canadian crude production, which have thus far taken about 140,000 barrels of oil per day off of the market.

So, why did the price go right back up the last two weeks after tanking so dramatically towards the end of December? The answer has largely to do with recent actions taken by OPEC+ nations.

Read the Rest Here

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The Oil And Gas Situation: Eight Predictions For 2019

Well, that all escalated – or rather, de-escalated – quickly, huh? During the course of a six-day vacation around Christmas, the WTI price for crude dropped from $50/bbl down to $42/bbl. That takes a situation on oil prices that was already troubling for most domestic producers into the potentially-calamitous range for companies saddled with heavy debt loads and high lifting costs.

This latest collapse in crude prices comes on the heels of a longer-term drop that lasted throughout October and November. From October 2 through November 30, WTI fell from $76.41/bbl to $50.93, a decline of about 33%, as it became obvious to traders and investors that the market had become significantly over-supplied despite the re-implementation of U.S. sanctions on Iran by the Trump Administration.

This overall 45% drop in the domestic benchmark price for crude took place during the same period when producers were setting their capital drilling budgets for 2019. While one might think that reality would cause a significant curtailment of drilling activity during the first half of 2019, consider that only about a third of that price drop had come about by November 1, by which time most of these companies were finalizing those budgets. With WTI sitting at $63/bbl at that time, few were anticipating a further drop of this magnitude by the end of December.

Here’s the thing: Thousands of domestic drilling projects that are economic to drill at $63/bbl are uneconomic to drill at $42/bbl. So right now we are already beginning to see reports that some companies are going back and reconsidering some budgeting decisions that were made just a month ago. Others are likely still in wait-and-see mode as they try to assess whether the December price drop is a temporary result of panic-selling or a more long-term phenomenon related to a weakening global economy.

Given all of this, my first prediction is that we will see a gradual fall in the domestic U.S. rig count throughout the first half of 2019.

 

Read the Rest Here

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Energy Week: Episode 6 – Oil Markets and Renewable Fantasies

In this episode, David and Ryan why the oil market seems overly jittery now that it appears the market is back in balance after three years of chronic over-supply.  They also discuss how super tankers co-loaded with crude from both the U.S. and Mexico have helped open up Asian markets to U.S. producers, why solar really isn’t cheaper than coal despite all the hype in the media, and celebrate the fact that Shell has now restored its full cash dividend thanks to its strengthening bottom line.

Listen to the Podcast Here

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Energy Week Podcast, Episode 4: Why the majors aren’t worried about “Peak Oil”

Energy Week, Episode 4:  Why the majors aren’t worried about “Peak Oil” but the markets are worried about events in Saudi Arabia.

Show Notes:  In this episode, David Blackmon and Ryan Ray discussed how the ongoing upheaval in Saudi Arabia is impacting oil markets, and the impacts it all could have on the planned IPO for Saudi Aramco.  Next, they talked about the reasons why the various “Peak Oil” theories and narratives are wrong, and why the big oil companies aren’t really worried about them.  Finally, David talked about the reasons why he thinks the U.S. industry just might not mess up the current positive oil price situation in 2018.

 

Listen to the Podcast Here

 

Links to articles referenced in Episode 4 of Energy Week:

Power grab in Saudi Arabia threatens oil market stability

 “End Of Oil” Narratives Are Misleading

Peak oil? Majors aren’t buying into the threat from renewables

Oil Pulls Back After U.S. Rig Count Sees Significant Increase

Why U.S. Oil Producers Might Not Mess Up A Good Thing In 2018

 

 

 

 

 

 

 

 

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The Oil And Gas Situation – Confusion Reigns In The Energy Media

If you read the Dallas Morning News for information about the oil and gas industry, you’d be best advised to do more than just scan the headlines.  Here are two examples of headlines that just don’t really match the content of the articles:

Trump Won’t Declare Dallas Firm’s Dakota Access Pipeline A Major Disaster – Well, no, that’s not at all an accurate description.  The state of North Dakota’s governor – Doug Burgum – did not ask President Trump to declare the Dakota Access Pipeline to be a “major disaster”.

Governor Burgum did ask the President to declare the site of the months-long protest/riot action against the Dakota Access Pipeline to be a “major disaster” in an effort to seek federal help in footing the $38 million bill for policing the often-violent protesters and cleaning up the epic mess they left behind when they finally cleared their illegal site.  Given that it was the federal government, under Barack Obama, that allowed these rioters to illegally occupy the site for half a year, it would seem that the Governor had a valid complaint.  President Trump disagreed, which is his right.  Either way, it would have been nice for the headline writer to accurately portray the content of the article.

Read The Full Piece Here

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